CalPERS to Declare Two Districts in Default

Committee proposes a reduction in benefits for state workers in two delinquent districts.

The $336 billion California Public Employees’ Retirement System (CalPERS) will likely cut loose two pension plans by declaring them in default of their financial obligations at its monthly board meeting this week.

CalPERS’s Finance and Administration Committee has recommended that the board declare the Trinity County Waterworks District and the Niland Sanitary District in default, and has called for a reduction in benefits for their workers. Trinity County Waterworks, located in Northern California, owes more than $1.5 million, while the Niland Sanitary District, which is in Southern California, owes $204,000.

Under California law, if an agency fails to pay the full amount owed upon termination of their contract, the CalPERS board can declare the agency in default and reduce retirement benefits in proportion to the amount of the deficiency in accumulated contributions.

In September 2016, Trinity County Waterworks voluntarily terminated its contract with CalPERS, and in January and February of 2017, the two had multiple discussions about the water utility’s inability to pay the preliminary termination amount.

CalPERS balked at Trinity’s request for a 20- to 30-year no-interest payment plan, and the two sides were unable to agree on a resolution for Trinity to pay the amount owed. In March, CalPERS sent Trinity an invoice for a little more than $1.5 million for the termination cost, and in April, Trinity became delinquent on its termination liability obligation.

CalPERS said it contacted the agency multiple times and sent several notices to request payment of the termination cost. Meanwhile, Trinity said it could not pay due to budget constraints, and repeated its request to pay its obligation over 30 years. In May, CalPERS sent a final collection letter to Trinity demanding payment of the outstanding amount within 10 days of the date of the letter.

The Finance and Administration Committee has also recommended that the board declare the Niland Sanitary District in default of its obligations, and reduce retirement benefits paid to employees and retirees of the agency over its failure to pay required pension contributions of just under $204,000.

CalPERS says Niland entered into a retirement contract with CalPERS in 1995 to provide retirement benefits for its local employees, but decided to terminate the contract in 2015. According to the committee, in September 2016, Niland was delinquent due to nonpayment of employer-paid contributions, associated administrative fees, and unpaid unfunded liabilities.

In June of 2017, CalPERS sent Niland an invoice for the termination liability in the amount of $203,997, and subsequently contacted the company multiple times to collect the amounts owed. CalPERS said Niland refused to pay the termination liability, and insisted it did not have a contract with CalPERS despite initiating a voluntary termination of that contract.

The CalPERS board is meeting between Sept. 18 and 20 at its headquarters in Sacramento, California.